Assortment and Sourcing Global? Regional? Local?

Transcription

1 Assortment and Sourcing Global? Regional? Local?

2 Facts and Data Challenges for Brands Potential competitive issues

3 IGD s latest UK shopper research, Shopper Trends 2010, reveals that nearly a third (30%) of shoppers claim to be specifically purchasing locally produced food. Source: IGD Report on IGD.Com

4 REVIVAL OF LOCAL SOURCING WHO are the shoppers? more prevalent among older (particularly those aged 45-54) more upmarket shoppers, a core group of shoppers for all retailers and manufactures many retailers have increased and/or highlighted their range of locally produced food recently Some large manufacturers are also emphasising their British and local sourcing credentials in their brand communications (e.g. Bernard Matthews, Müller and Walkers) Source: IGD Report on IGD.Com

5 REVIVAL OF LOCAL SOURCING WHY? e.g. UK Freshness: Over half (57%) of shoppers perceive local food to be fresher because it hasn't travelled as far Economic factors: Over half (54%) want to support local producers, while many others see it as a way of supporting local retailers (34%) or keeping jobs in the area (29%) Environmental factors: Three in ten (30%) shoppers are motivated to buy local food because they think it is good for the environment as it hasn t travelled as far The resilience of local foods during the recession: growing commitment of shoppers to support their local economy Source: IGD Report on IGD.Com

6 NOT JUST A UK TREND E.g. Germany Private Labels advertising local source E.g. France Private Labels «Reflets de France» etc Source: Planet Retail, Rewe.com Source: Regal Magarine, 10/2009 p43-48

7 Challenge for Brands Retailer request for Brands to specify % of national production involved - Totally National Product - At least 50% Local production - Below Source: Regal Magarine, 10/2009 p43-48 WHY? Easier Flexibility Time response

8 Challenge for Brands IGD QUESTION If you are a national or multinational manufacturer, how can you meet shopper demand for local products? Do you have a provenance story to communicate? Source: IGD Report on IGD.Com

9 REGIONAL SOURCING G4= 4 Countries Belgium France Italy Spain Source: Carrefour presentation to Investors on Carrefour.com

10 REGIONAL SOURCING The Challenges Gain in Costs at retailers. Increase in costs of Manufacturers Source: Carrefour presentation to Investors on Carrefour.com

11 REGIONAL SOURCING The Challenges 4 Different P for G4 Product/ assortment (Skus) Promotion culture Delivery hence Price Source: Carrefour presentation to Investors on Carrefour.com

12 REGIONAL SOURCING The Challenges Combining demand/marketing realities Italy: 115 Belgium: 110 France; 105 Spain; 92.with supply and sustainability constraints M I PR CE Source: Eurostat Comparative Price Levels in 37 European Countries

13 Defensible History Income LEvel REGIONAL SOURCING The Challenges An example of differences costs explaining difference in sales price $7.00 $6.92 $1.27 $6.00 $5.65 $0.15 $0.20 $6.92 $5.00 $0.16 $0.43 $4.71 German Triple Net Higher Conditional Discounts in Germany Lower Environment Taxes in Germany Lower Account Investment in Germany Transship Cost Nonjustifiable Gap Dutch triple Net PRICEWORKS

14 GLOBAL SOURCING

15 GLOBAL SOURCING

16 FROM REGIONAL TO ALL GLOBAL? Regional GLOBAL

17 SCALE ECONOMIES

18 In Summary Manufacturers confronted with different and contradictory requestions Manufacturers have multiple customers, they cannot organise their supply chain according to each retailer s proprietary approach as it is costly and inefficient There is a tension between the need to ensure efficiency through scale (regional/global sourcing) and the trend toward local resourcing. What will be Tomorrow s supply chain?

19 COMPETITIVE ISSUE EU Study on Territorial Restaints «will assess measures to address territorial supply constraints, to the extent that these create economic inefficiencies and contradict Internal Market principles» «A case in point relates to retailers from a given country being «forced» to source locally when dealing with multi national suppliers, thus raising obstacles to cross- border trade» «will produce an Impact Assessment based on a detailed study to inform its action by the end of 2010» Source: Communication from the Commission, COM(2009)591,

20 AIM RESPONSE (so far) Retailers are free to source The brands industry is a strong supporter of the internal market. We regularly draw attention to inefficiencies, often as a result of incompatible national rules. Retailers are free to source from anywhere in the Single Market, directly or via wholesalers / agents.

21 AIM RESPONSE (so far) Value chain efficiencies Retailers usually have no incentive to source brands from another market than the ones in which their stores are located because this is the most efficient and sustainable solution for both parties. Manufacturers design and set up manufacturing, distribution and marketing structures that are adapted both to the European and to the local market needs to optimise their operations.

22 AIM RESPONSE (so far) The Viho case If a subsidiary has no real autonomy in determining its course of action on the market, the mother company and subsidiary constitute a single economic unit. Therefore agreements between them, for instance on distribution policy, would not fall under Article 101.